Is Natural Gas Rising Due to Oil’s Fall?



Natural gas prices

On May 1, natural gas June futures rose 1.7% and settled at $2.62 per MMBtu (million British thermal units)—5.2% above the lowest closing level for active natural gas futures since June 6, 2016.

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Is natural gas rising over oil’s fall?

In the trailing week, natural gas prices rose 4.8%. US crude oil prices fell 3.5% during this period. Natural gas’s 34-month low and US crude oil’s six-month high occurred within a gap of three trading days. Energy traders might have switched from oil to natural gas because of an attractive risk-to-reward ratio in natural gas.

Natural gas prices rose

On April 30, the natural gas supply in the lower 48 US states was 89 Bcf per day—0.8 Bcf per day less than the previous day, according to Refinitiv data. Based on the weather forecast on May 1, the total degree days for the next two weeks fell from 156 on April 30 to 152, according to Refinitiv data. However, the expected total degree days are above the level of 134 last year—a positive development for natural gas.

Moving averages

On May 1, the natural gas active futures were 3.4%, 12.5%, and 15.9% below their 50-day, 100-day, and 200-day moving averages, respectively. On the same day, natural gas prices moved 0.9% above their 20-day moving average—the first time since March 20. Prices above the short-term moving averages indicate a possible short-term run-up in natural gas.

Natural gas–weighted stocks like Chesapeake Energy (CHK), Antero Resources (AR), and Cabot Oil & Gas (COG) might be sensitive to any changes in natural gas prices. Broader market indexes, like the S&P 500 Index (SPY), will likely be impacted by any changes in natural gas prices.


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